As UK participants return to their desks following an extended week to observe the late Queen’s funeral, they will be greeted by a week full of central bank announcements. The Fed and Bank of England will highlight, with rate hikes expected from both.
The Fed’s decision is a lot more clear-cut. It’s overwhelmingly likely they opt for a 75 basis point rate hike with a small chance they choose a larger 1% increase. The markets have accurately reflected the above in various pricing mechanisms.
The Bank’s announcement on Thursday is a lot more uncertain with traders caught between a 50 and 75 basis point hike. As a result of the uncertainty in outcome, the chances of higher volatility increase. We can see this in the outlook for GBPUSD, which models imply could have a 200 pip (2 cent move) in the wake of the announcement.
With so much event risk this week, please speak to your Cornhill dealer who will be able to provide strategies on how to mitigate any downside risks.
Have a good week.
Written by Viv Savani. 8:02am, September 20th 2022
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